NEXTRADE (NXT) will temporarily ban upper and lower price limit orders in the premarket starting on the 12th. The move comes after repeated criticism that the opening price being matched at the upper or lower limits could distort price information.
NEXTRADE (NXT) said in a press briefing on the 7th, "Until the introduction of the static volatility interruption (VI) mechanism, we will temporarily ban upper and lower price limit orders in the premarket to minimize cases of executions at the limits caused by order errors." Upper and lower limits refer to the highest and lowest prices within the daily price band of ±30% from the reference price.
NEXTRADE (NXT) explained, "As a multilateral trading facility (alternative trading system) rather than a regular exchange under the Financial Investment Services and Capital Markets Act, we operate the market using a call auction method like global alternative trading venues," adding, "Some of the executions at the limits so far are presumed to have resulted from errors that occurred during the order processing stage." This is a method that continuously matches trades in the order in which executable quotes are received first.
The measure follows concerns that the market's price information could be distorted when the opening price in the premarket is executed at a sharp drop. In fact, on the 6th, 11 shares of SK hynix were transacted at the lower limit in the NEXTRADE (NXT) premarket.
Such lower-limit executions also affected the derivatives market. SK hynix had 1 share transacted at the lower limit right after the premarket opened on the 28th of last month, and that price was reflected in the mark price of SK hynix perpetual futures on an overseas crypto derivatives exchange, forcing the liquidation of $57.4 million (about 81.5 billion won at the exchange rate at the time) in long positions.
NEXTRADE (NXT) will also introduce a static VI starting on the 14th of next month. Applying VI from the opening price, trading will be temporarily halted if the price moves 10% or more from the reference price, and a two-minute single-price auction will be conducted to promote price stabilization.
NEXTRADE (NXT) said, "Going forward, we will closely monitor for any abnormal signs related to sharp price swings caused by orders such as upper and lower limits, and we will work closely with financial authorities."